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Do LLCs Need a Board of Directors?

Limited Liability Companies (LLCs) are a fairly recent development and most experts consider them a “hybrid” of a partnership and a corporation. As such, they have some of the features of both. All corporations, regardless of the state, must have a shareholder-elected Board of Directors. An LLC is not required to have a Board of Directors, but can adopt this form of management if the members (the owners of the LLC) choose to do so. Here’s what you need to know about the management of an LLC.

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LLC Board of Directors

If the members of an LLC choose to have an LLC Board of Directors, it will function according to the LLC’s bylaws, which typically designate how many board members there should be; how they are selected; and when, where, and how often they meet. The Board of Directors in any organization is usually the top-level decision-making body for the company. Traditionally, a board is comprised of both “insiders” (executive-level employees) and outsiders (people with relevant experience who can bring balance, perspective, and oversight to the corporate culture), but that is not a requirement for an LLC.

Other LLC Management Options

Limited Liability Companies have the flexibility to not have a Board of Directors. The members can decide to manage the company jointly, which can obviously be challenging, unless there are just a few members. In this scenario, the percentage of each member’s investment share in the LLC determines the member’s pro rata (in proportion) decision-making authority.

Alternatively, the members can elect certain members to be “managing members,” or they can choose to designate and/or hire a manager who is not even an LLC member.

Of course, it’s possible for an LLC to consist of just one member, in which case the management structure is up for debate.

Benefits of Forming an LLC

This enormous flexibility in choosing a management method is one of the benefits of an LLC. In addition, an LLC offers liability protection that a partnership doesn’t offer, as well as the ability to choose the most advantageous form of taxation. If this sounds appealing to you, and you haven’t formed your LLC yet, you can do so quickly and easily by using our online LLC incorporation service.

Keeping Records

If you choose management through a Board of Directors, or some other managing group, make sure you follow the proper business procedures for board meetings. A critical component in maintaining your liability protection is to record all your meetings with regular Corporate Minutes. Corporate Minutes should include the names of those present and absent, a copy of the agenda, an item-by-item description of the matters discussed, and actions (votes) on any issues.

This record-keeping procedure is more than just a formality—it may be a requirement by your state, so you’ll want to make sure that this gets properly managed. If you’re not sure what should be included, you can use our downloadable Corporate Minutes form to get you started and keep you on track.

If you are finding that your board meetings are taking up too much of your time, then consider using Unanimous Consent to help speed things along. Besides, you probably formed an LLC for all the benefits and flexibility so you should take advantage of this and work things around for your own business’s needs.

Get startedStart Your IncorporationAnswer a few questions. We'll take care of the rest.

Get startedStart Your IncorporationAnswer a few questions. We'll take care of the rest.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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